Brazil's high power cost to boost distributed solar generation

SAO PAULO, July 14 (Reuters) - Sky-high power prices in Brazil following the worst energy crisis in 15 years will favor quick expansion of distributed solar generation in the country, according to investors and consultants.

Startup companies are already offering packages that include financing for installation, embarking on a generation model that has caught the government’s eye as it scrambles to increase power supply.

Brazil’s power sector watchdog Aneel is holding public hearings to discuss regulations to expand the system. It expects distributed generation to reach 2 gigawatts by 2024, up from nearly nothing now. At current installation costs, that would amount to 15 billion to 20 billion reais ($4.79 billion to $6.38 billion) in investments.

“Power generation, particularly solar and wind, is basically the only sector detached from the current economic crisis in Brazil,” said Mario Lima, a director with consulting firm EY in Rio de Janeiro.

“Solar is very quick to install so it has a huge advantage over other sources in the current situation,” he said.

Distributed generation (DG) refers to electricity generated at the point where it is consumed. The model usually works with solar photovoltaic panels on rooftops, connected to the grid. Consumers produce enough power for their own use and sell the surplus to the grid.

Brazil’s power prices rose about 17 percent last year and will jump 41 percent further this year, according to central bank estimates, as expensive backup thermal plants work around the clock.

As a result, DG has become more attractive.

“Brazil is a huge opportunity regarding solar generation. Power bills are very high, solar radiation factors very strong and the market is basically virgin,” investor Henrique Loyola told Reuters.

He recently sold his stake in XP Investimentos, a large Brazilian stock brokerage, and is investing 20 million reais with three partners in a new company called SolarGrid. Loyola expects to go from 50 clients in June to 1,000 by the end of the year.

Large utilities are also interested in the sector.

“The Sao Paulo area has high potential for distributed generation. A lot of people with high purchasing power and high energy consumption,” AES Brasil president Britaldo Soares told Reuters in a recent interview.

Soares said AES Brasil, controlled by AES Corp, is looking at solutions carried out by AES Distributed Energy in the United States and evaluating whether it can replicate some of them in the Sao Paulo metropolitan area. (Additional reporting by Luciano Costa; Editing by David Gregorio)